Daily markets morning round-up: E-mini S&P, gold, crude & Treasuries

Fundamentals: Equity markets took it on the chin into the close yesterday and the S&P traded to a new intraday low of 2577. Considering such, this was a good overnight session. In fact, we are surprised we did not see continued selling into Asian hours. While the Nikkei is down more than 2% today, much of the damage was incurred on the futures side during U.S. hours. The big news this morning is that the government finally did it, they passed a spending bill that will last two years and not two days. The agreement will increase federal spending by $300 billion. To some degree, we cannot argue that the stock market probably feels some sort of comfort from this. The question today is, will buyers show up ahead of the weekend? One thing we will be watching is the 10-year treasury yield which is back to the highs, something that will make equity markets a little uncomfortable. How do you think they are paying for this new spending bill? Lastly, we have heard throughout the week that an unwind from the VIX destruction was still being done. Did yesterday’s close jump that hurdle? Chinese inflation data last night was in line with expectations on a yearly basis, but the monthly CPI fell just shy. There is no major data out of the U.S today.

Fundamentals: Crude was able to stabilize into settlement after trading to a session low of 60.59. However, continued sell pressure from equity markets took Crude lower late in the electronic session. Inflation data from China cooled last night as expected; CPI YoY matched expectations at 1.5% but this is down from last month’s read of 1.8%. With crude battling against the psychological $60 per barrel, traders should keep an eye on two things today that will help drive this market; equities and the Dollar. Baker Hughes rig data is due at noon Central; we have seen 18 rigs added in the last two weeks and production push records.

Technicals: Crude continues to pound against major four-star support at 60.04-60.12. This is a four-star level mainly because of the significance of a close below here. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.

Gold (April)

Yesterday’s close: Settled at 1319

Fundamentals: Gold has not performed during this stock market volatility. This is because the dollar has strengthened from oversold conditions. Not to worry though, we believe the dollar’s bounce is getting close to done. Furthermore, we see the dollar making a new low in the not too distant future. What does this mean for gold? There is a key psychological level at $1,300, and as long as this area roughly holds, it will set gold up for a bullish continuation on the year.

Technicals: We are long-term gold bulls but have also been chart friendly. We Neutralized our Bias below $1,280 in November/December to turn Bullish upon the Fed hike. We then Neutralized it again at $1,360. We began reintroducing our Bullish Bias yesterday. Is the bottom in on this leg lower, probably not. However, we are looking to major three-star support at 1301.1-1306.6 to be a strong area to position against in the long term. Below there is also strong support and a backstop of sorts at 1290.4-1291.5. Traders should lean on these levels to position long for the next wave higher, one that we believe should take out $1,400.

Fundamentals: After encouraging price action early yesterday and a draw on the larger side of expectations, Natural Gas took out key support last night. A snowstorm has swept across the Midwest and will last into this weekend. In fact, it's been snowing across here all week. At the same time, there are school closings and such, this can reduce consumption. Though this likely played a factor in the lower price action, we believe it to be more technical.

Technicals: Price action is dipping sharply below key support into this morning.

10-year Treasuries (March)

Yesterday’s close: Settled at 120’285

Fundamentals: Poor auctions this week added to pressure on the long end of the treasury complex. The 10-year traded to a new low early yesterday before recovering. The lower action sent yields higher and consequently put pressure on equity markets. Which in-turn encouraged buying of treasuries. In a complicated week, the domino effect is real. There is no major U.S data today and we would imagine seeing continued buying if equities remain under pressure ahead of the weekend.

Technicals: We remain Neutral on the 10-year at the moment. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.

About the Author

Bill Baruch is President and founder of Blue Line Futures, a leading futures and commodities brokerage firm. Bill has more than a decade of trading experience and focuses on developing trading strategies for both long and short-term trading approaches. Prior to Blue Line, Bill was the Chief Market Strategist at iiTRADER. Bill is a featured expert on CNBC, Bloomberg and the Wall Street Journal as well as other top tier publications. Blue Line Futures offers five research reports each day with the Blue Line Express